Posted 3 years ago on Sept. 12, 2013, 12:04 a.m. EST by WSmith
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Exclusive: The Koch brothers' secret bank

Just when you thought you knew how pervasive the good brothers were, someone turns over a rock in the sewer of hell, revealing even more.

By MIKE ALLEN and JIM VANDEHEI | 9/11/13 9:00 PM EDT

An Arlington, Va.-based conservative group, whose existence until now was unknown to almost everyone in politics, raised and spent $250 million in 2012 to shape political and policy debate nationwide.

The group, Freedom Partners, and its president, Marc Short, serve as an outlet for the ideas and funds of the mysterious Koch brothers, cutting checks as large as $63 million to groups promoting conservative causes, according to an IRS document to be filed shortly.

The 38-page IRS filing amounts to the Rosetta Stone of the vast web of conservative groups — some prominent, some obscure — that spend time, money and resources to influence public debate, especially over Obamacare.

The group has about 200 donors, paying at least $100,000 each in annual dues. It raised $256 million in the year after its creation in November, 2011, the document shows. And it made grants of $236 million – meaning a totally unknown group was the largest sugar daddy for conservative groups in the last election, second in total spending only to Karl Rove’s American Crossroads and Crossroads GPS, which together spent about $300 million.

Short, a soft-spoken but ferociously conservative 43-year-old operative, provided us a draft of a forthcoming IRS filing that will soon be available to the public. Short, like most in the Koch empire, feels wealthy conservative activists such as Charles and David Koch get a bum rap from the media. So, Short wants to ease his groups and their cause out of the shadows.

“There’s a mystery around us that makes an interesting story,” Short said in an interview in his conference room. “There’s also a vilification that happens that gets exaggerated when your opposition thinks you’re secretive. Our members are proud to be part of [the organization].”

Democrats have their own vast web of secretive funders – and Short is right: Few liberals got as much scrutiny as the Koch brothers over the past few years.

But the “proud” donors are not so proud they will publicly identify themselves as donors. Short refused to open up about the men and women behind the quarter-billion-dollar fund, beyond saying that Koch-linked entities provided a “minority” of the funds, and that the largest single donor gave about $25 million.

Freedom Partners is organized under the same section of the tax code as a trade association, a 501(c)6, allowing the group to conceal its donors from public release, although the amounts and recipients of its major grants are public.

The filing offers a rare tour of the conservative movement and how it gets its funds:

• Center to Protect Patient Rights, a group that vehemently opposed Obamacare: a total of $115 million, from three grants.

• Americans for Prosperity, an organizing and advocacy group that is courted by Republican presidential candidates: $32.3 million.

• The 60 Plus Association, a free-market seniors group that also opposes Obamacare, $15.7 million.

• American Future Fund, an Iowa group that spent a lot of money on ads in 2012, many for Mitt Romney, $13.6 million.

• Concerned Women for America Legislative Action Committee, which gets involved in a number of social policy debates, $8.2 million.

• Themis Trust, a Koch-based voter database that is made available to other conservative organizations, $5.8 million.

• Public Notice, a fiscal policy think tank, $5.5 million.

• Generation Opportunity, a group for “liberty-loving” young people, $5 million.

• And several groups — including the State Tea Party Express, the Tea Party Patriots and Heritage Action for America — got less than $1 million.

Members are drawn from the Koch brothers’ semiannual conferences, a 10-year-old tradition that draws top politicians – including, last month, House Majority Leader Eric Cantor (R-Va.) and House Budget Chairman Paul Ryan (R-Wis.). Many seminar attendees also give directly to Koch-approved groups, and the Freedom Partners funds do not include the Kochs’ many gifts to university think tanks.

Yes, CU must go, the Roberts 5 must go, and the teabag Taliban kooks we let invade state and federal government in 2010's midterm election must also go, which is why we must turnout for 2014's midterm, bigtime.

The billionaires' latest group could be the first in a new class of campaign finance weapons.

By Alex Seitz-Wald | September 13, 2013 | 1:57 p.m.

David Koch, executive vice president of Koch Industries, attends a meeting of the Economic Club of New York, Monday, April 11, 2011. (AP Photo/Mark Lennihan)

The Koch brothers are nothing if not innovators in the murky world of campaign finance, and their latest venture—a secret fund that quietly distributed $250 million to conservative groups during the 2012 election, as by revealed by Politico yesterday—is no exception. The group explores near-virgin territory in the tax code as the first in what could be a new class of weapons in the secret money arms race.

On its face, Freedom Partners looks like any of the other dark-money groups that have proliferated in recent years. Those tax-exempt "social welfare" organizations, called 501(c)(4)s for their tax code designation, can raise unlimited amounts of money without disclosing their donors, and can spend just shy of half of it on politics.

But unlike those groups, Freedom Partners is organized under a different section of the tax code, 501(c)(6), which is typically reserved for chambers of commerce and trade groups like the American Bar Association and the National Beer Wholesalers Association. Political activity from these groups is nothing new—the U.S. Chamber of Commerce was one of the biggest spenders in the 2010 and 2012 elections—but Freedom Partners is plainly not a business association in the traditional sense; its roughly 200 donors are united by a common ideology, rather than a common industry.

"I haven't seen a situation like this, and we watch that area pretty closely," said Jim Clarke, the senior vice president of public policy at the Society of Association Executives, a sort of trade association of trade associations. "I can safety say, anecdotally at least, that this would be new."

Why Freedom Partners would chose 501(c)(6) status over the more common 501(c)(4) is a bit of a mystery because the rules governing political activity are essentially the same for both, but experts speculate there may be some advantages in the choice.

Douglas Varley, a professor at Georgetown Law and a lawyer at Caplin & Drysdale who advises nonprofit groups, said he hasn't seen an organization quite like this before. "I'm surprised that it's a (c)(6) from a pointy-headed lawyer's perspective, but I'm not that surprised from a realist political perspective," he said.

One advantage of the status, Varley explained, is that companies could write off direct contributions to the group as business expenses more easily. It's possible to do that with a more traditional 501(c)(4) group, but harder to justify, while contributions to business associations are routine.

Indeed, when asked why his group chose the particular section of the tax code it did, Freedom Partners spokesperson James Davis told National Journal, "The (c)(6) structure allows us to work with businesses—both large and small—across a variety of industries to advance our member's business interests of promoting the principles of a free market and a free society."

Meanwhile, with an eye on the increasing scrutiny directed at (501(c)(4)s, Freedom Partners may have decided it was safer to move into a new regulatory space. Rep. Chris Van Hollen, D-Md., recently sued the IRS to try to force it to crack down on (c)(4)s, while some state attorneys general, such as New York's Eric Schneiderman, have been trying to make the groups disclose their donors. Then there's all the bad press that the dark-money groups sustained during the 2012 campaign, and the renewed scrutiny during this year's IRS scandal, which revolved around allegations that the tax agency improperly targeted tea-party 501(c)(4) groups.

With all the heat on those groups, Viveca Novak of the Center for Responsive Politics said she's heard some political strategists say they've been looking at section 501(c)(6) as a potential refuge. "Business associations may not fall within the charitable trust jurisdiction of state attorneys general, so the arrangement could help stymie states' efforts to shed some light on who is behind the organizations," Novak wrote on the campaign finance watchdog's blog.

Politically, it would also be much harder for states to regulate these kinds of groups, Varley pointed out, because any new policy on 501(c)(6)s would affect not just ideological dark-money group, but all the quotidian—and powerful—industry groups in a state, as well as local chambers of commerce.

There's nothing illegal or underhanded about using the designation this way, though any 501(c)(6) organization does have to meet certain requirements to be a considered a business league. Apparently Freedom Partners has satisfied them. Davis said the IRS officially recognized his group in January of last year after it was in established the previous November.

And it's not entirely without precedent. The conservative Americans for Job Security set up shop back in 1997 as a 501(c)(6). But otherwise, Freedom Partners appears to be in uncharted waters. "We've seen significant amounts of money spent through (c)(6)s, but they've been through well-established, more well-known trade organizations like the Chamber of Commerce," said Paul S. Ryan of the Campaign Legal Center.

Marcus Owens, who for 10 years ran the IRS office that oversees tax-exempt organizations, said that while he didn't see an obvious benefit to the new status, it might just serve to complement other groups in the Koch Brothers network. They already have their hands in 501(c)(3)s, such as the American Legislative Exchange Council, and 501(c)(4)s, such as Americans for Prosperity, plus their company's PAC, so a 501(c)(6) is the next logical place to expand to create a new giving option for donors.

"It strikes me as maybe the Koch Brothers are trying for one of each kind of organization. Maybe next they'll set up a labor union!" Owens quipped. Call it the campaign finance version of EGOTing.

They might be willing to if the IRS and other govt agencies weren't being wielded as a tool of reprisal. You did catch the one liner that pointed out that the Dems have the same sort of secret donor networks, too right?

The IRS did exactly what they were supposed to do and, in fact, should have gone farther. So, that excuse doesn't fly.

Show the Democrat's secret networks. I know what they are. But, I don't think you do. So, do more than scream Soros. Start a thread that isn't filled with lies or emotional tantrums and demonstrate a pattern. Get specific. Make sure that your hatred for Obama isn't the central feature because he isn't up for reelection and it will demonstrate the network still exists with or without him. Further, don't bother with Acorn because it was already proven to be fabricated bs.

In the world of political money, Democrats like to cast themselves as the defenders of transparency and crusaders against corruption. They've asked the IRS to investigate big-spending nonprofit groups such as Karl Rove's Crossroads GPS, and they've lead the effort in Congress to pass the DISCLOSE Act, which would've forced politically active nonprofits to reveal their major donors. Yet one of the most secretive dark-money groups of the 2012 campaign season was allied with the Democratic Party's standard-bearer, President Obama.

Founded by former Obama White House aides Bill Burton and Sean Sweeney, this shadowy outfit is known as Priorities USA. If the Priorities name sounds familiar, that's because it's the sister group of the flagship pro-Obama super-PAC, Priorities USA Action. (Yes, the two names are confusing. From here on, any mention of Priorities refers to the dark-money nonprofit.) Organized under section 501(c)(4) of the tax code, like the Sierra Club and the National Rifle Association, Priorities USA can legally hide the identities of its donors, but it can't spend the majority of its money on pure politics.
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Politically active nonprofits plunged into politics more aggressively than ever during the 2012 election cycle, mostly on the conservative side. Rove's Crossroads GPS spent more than $70 million, the US Chamber of Commerce $33 million, the Koch-backed Americans for Prosperity upwards of $39 million. We know these figures because the groups sometimes announced them in press releases and, closer to election time, reported certain spending to the Federal Election Commission. However, the details surrounding Priorities USA, one of the only purely political nonprofits on the Democratic side, are a mystery.

Priorities has a website, where the group says it is "dedicated to mobilizing Americans to preserve, protect, and promote the middle class, and to ensure opportunity and freedom for the next generation." Nowhere on that site will you find a press release describing the group's fundraising or spending. Co-founder Bill Burton declined multiple requests for information on how much the group raised and spent—if it spent any money at all. The group's sparse Facebook and Twitter accounts feature mostly links to news articles. The only blip on the radar Priorities made was in late 2011 when it paid for $215,234 in operating expenses for its sister super-PAC. That transfer raised hackles within the campaign finance reform community because super-PACs are supposed to disclose their donors, yet here was a secretive nonprofit spending six figures with no disclosure.

According to the Los Angeles Times, Priorities raised $2.3 million in secret donations in 2011. Not that the Obama White House was any help raising money for the group: Top Obama aides were not allowed to appear at fundraisers for the Priorities nonprofit, the Times reported, though they could appear at events for its super-PAC affiliate.

Asked how Priorities spent its money, the Democratic operative said: "Beats the shit out of me."

A Democratic operative familiar with Priorities' work, who requested anonymity to speak about internal figures, says the super-PAC and the nonprofit together raised "close to $95 million" for the 2012 election cycle—within touching distance of the collective $100 million goal the groups had established. According to federal filings, the super-PAC raised $64 million through October 17. It's likely, then, that the Priorities USA nonprofit raised millions of dollars in dark money to get the organization near that $95-million mark. (Burton and other fundraisers for Priorities refused to say exactly how much the nonprofit hauled in.)

On the spending side of the ledger, it is hard to tell what Priorities did. Priorities' website says it conducted an education-related poll this August, and paid for two web videos on tax fairness and education. And...that's it. Asked how Priorities spent its money, the Democratic operative said: "Beats the shit out of me."

The operative predicts, though, that dark-money nonprofits will emerge as major players post-election in the fight to influence policy battles in Congress, such as a fiscal cliff deal, rewriting the tax code, and reforming Medicare, Medicaid, and Social Security. "The big sleepers are the 501(c)(4)s," the operative says. "That's the intriguing part."

Priorities USA's shadowy nature has attracted attention from watchdogs and government officials concerned about all the secret money sloshing around state and national elections. This summer, New York Attorney General Eric Schneiderman, a Democrat, requested information from Priorities USA about its fundraising and spending activities; Schneiderman made the same request of nearly two-dozen other nonprofits including Crossroads GPS, the conservative American Future Fund, and America Votes, which acts as a conduit between labor unions, environmental groups, and other members of the progressive community. (Schneiderman's investigation is still ongoing.)

Democracy 21 and the Campaign Legal Center, two groups that advocate for more regulation of political money, cited Priorities USA in an April letter to the Internal Revenue Service demanding an investigation and, when necessary, a crackdown on politically active nonprofits. The two groups accused (PDF) Priorities, among others, of claiming tax-exempt status as a way to "keep secret from the American people the donors financing their campaign-related expenditures."

In June, a spokesman for Crossroads GPS dragged Priorities into the brewing fight between Rove and Team Obama over dark money's place in the campaign. After the Obama campaign's top lawyer, Bob Bauer, argued to the Federal Election Commission that Crossroads should reveal its donors, Crossroads spokesman Jonathan Collegio shot back: "Folks would do well to consider this a goofy sideshow until Obama sends the same letter to Priorities USA."

I never mentioned Soros in this thread. I just wanted to point out that the Dems have a "secret bank" of their own. Both parties are taking advantage of CU to the detriment of our electoral process, but you just seem to like to focus on only 1/2 the crooks in politics.